FEATURE: Africa’s mobile payment growth

Africa’s mobile payments market is attracting attention worldwide as e-payments and digital cash platforms continue to skyrocket both in number and value. There are several reasons for this extraordinary growth, not the least of which is the increasing affordability of mobile devices that has progressed in tandem with their ease of use. Now, more than ever, it is easy to obtain a mobile device that has e-payment functionality. A new generation of entrepreneurs is taking advantage.

That said, Africa has had a major problem with technological build-out: lack of infrastructure and challenges in creating infrastructure. Cable theft is a big issue as well due to the value of copper. But the lack of infrastructure has spurred innovation. And lack of access to formal payment facilities has also driven this market as formal banking has never been as common or as preferred as it is in, say, Europe or North America.

M-Pesa is the biggest name in African mobile payments. Its monthly transactions now total about $150 million and more than 70% of Kenya’s population uses it, according to the Financial Times. And the GSMA has documented a steady increase in overall mobile money transactions around the continent, led by Eastern Africa. But M-Pesa is the tip of the iceberg; startups are fueling Africa’s mobile payment markets. This week, CNN spotlighted SnapScan, a free mobile app developed in South Africa under FirePay’s wing, which has been adopted by 12,000 businesses across the country. And international telecom companies such as U.K.-based Vodafone and India-based Bharti Airtel have dipped their hands in the pot, partnering with companies including MFS Africa, which launched a continent-wide mobile payment platform that counts 500 million customers, according to the Wall Street Journal.

Despite these massive shifts, not everything is coming up roses for African tech startups in the payments industry. As more people exchange more money across digital platforms, the risk for theft and identity compromise has increased. While this issue is not unique to Africa’s mobile markets, it will remain a significant concern as the e-payment industry continues to build out.

Additionally, reports have noted that the challenge of managing cash-based agent networks continues to make costs high. For example, the World Bank has said that the average cost of sending money to sub-Saharan Africa is 9.53%. Nevertheless, the World Bank also estimates that money sent home to sub-Saharan Africa by foreign workers increased 2.2% to $32.9 billion in 2014 from 2013; that rate is expected to grow an average of 2.7% between 2015 and 2017.

Challenges aside, it is clear that the digital payment market will continue to draw foreign business investment, and profit from development by native entrepreneurs. Biztech Africa reported that the Alliance for Financial Inclusion renewed its partnership with MasterCard at the African Mobile Phone Financial Services Policy Initiative meeting held in Dakar, Senegal this week. More government agencies are realizing that a public/private relationship is needed to efficiently build out digital finance markets. Looks like global finance conglomerates couldn’t be happier to participate.